I understand how it works. though I'm not sure you are too familiar with it.
Normally the short seller will have to gain title to the instrument before they can short sell.
Obviously this would not be the case on crypto exchanges.  This is a HUGE difference. Do you understand that?
What I am concerned about is back door deals done by exchanges which allow certain participants to short sell using algorithmic trading systems.
Most people trading on crypto exchanges are "small fis" so it's quite easy for someone with deeper pockets to manipulate the markets.

It's a little naive to think these guys are helping you or even neutral participants.